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Tudor Investment Corporation’s co-founder on how to be a great hedge fund trader

Trader

To describe Peter Borish as the forgotten man of Tudor Investment Corporation would be harsh, but his light certainly shines less brightly than his co-founder Paul Tudor Jones, who remains at the helm of the firm. Plucked from a job monitoring FX futures and options at the Federal Reserve Bank of New York in 1985, Borish was installed as Jones’ right-hand man at Tudor from the outset and remained there until 1994.

Jones is credited with successfully shorting Black Monday, but it was Borish’s model that mapped the market and noted the similarities between the 1987 crash and the stock market collapse in 1929. “I don’t want to inflate my expertise, at the time I met Paul I was just a young kid not long out of grad school. He needed someone to build this model, which I was able to do and was fortunate enough to get the job at Tudor. We made it through the 1987 crash, which really put us on the map,” he tells us.

Borish went on to form his own CTA, the Computer Trading Corporation, in 1995 where he is still president and CEO. He says has no regrets about leaving Tudor – which now has over $11bn in assets under management and helped Jones amass a net worth of $4.3bn. “I needed a better work-life balance, and starting my own firm – rather than being number two – allowed me to spend more time with my children.”

These days Borish posits himself as a strategist and trading coach, recently launching Quad Advisers – an incubator and accelerator for small to mid-sized hedge funds with $20-50m in assets under management. It offers capital to entrepreneurial hedge fund managers with a good track record, but also provides infrastructure such as a trading platform, in-house analyst research and accounting and technology services. In return, it takes a 20% cut of the top-line revenue of these funds.

The barriers to entry for launching a hedge fund are getting ever-higher because of rising regulatory costs from new rules like Dodd-Frank in the US and the Alternative Investment Fund Managers Directive (AIFMD) in Europe. Research by Citi last year suggested that traders starting hedge funds now need $300m in assets under management just to break even.

“You need to have an alphabet soup of expertise, a CTO, a CFO, COO a GC and the like. We can provide that,” says Borish. “When we started Tudor all you needed was a Bloomberg machine, a methodology and you could even use your own capital – we were the innovators. The larger the hedge fund the more difficult it is to generate alpha and you get close to being an index hugger. We want to find nimble operations with an entrepreneurial mindset and give them the tools to succeed.”

What makes a good hedge fund trader

The use of trading coaches is gradually increasing in popularity on the buy-side. Hedge funds like Brevan Howard, Man Group and, of course, Tudor Capital employ coaches to look at factors like the diet, sleep, alcohol intake and the emotional well-being of their portfolio managers to improve performance.

Borish, who works as a trading coach for the hedge funds that Quad Advisors partners with, says there’s no one methodology employed to train hedge fund traders, but that his job is fundamentally to recognise his charges qualities and “push them a little further” to ensure they reach their potential.

“A lot of people have spoken about the importance of not having an ego as a trader, so that you can admit you’re wrong. But I think you need a big ego to be a successful trader, even if you lose. You need the confidence to say ‘OK, you got me this time, but I’ll get this back again’. The key is longevity in the hedge fund world and a quantifiable track record – we’ve all seen enough flashes in the pan.”

Prop traders are clamouring to get into the hedge fund sector as investment banks are being forced to stop trading their own money under the Dodd-Frank rules. “The problem for a lot of traders in the investment banks is a lack of a demonstrable track record,” says Borish. “My advice is to be as entrepreneurial as possible, start small and develop a reputation over the course of 24-36 months.”

There’s one area where Borish’s heart leads his head, however – sport. He describes himself as a “long-suffering” fan of the New York Jets American football team and the New York Knicks NBA outfit. It’s basketball, he says, that helps him switch off from the day job.

“I lace up my shoes, get on the court and it clears my mind, which is really important if you want to be able to continue to work affectively,” he says. “Obviously, I love spending time with my wife and family, but basketball is a something that really alleviates the stress of the day job for me.”

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